Why property markets just got a lot more interesting: Robert Simeon

Every time the Australian economy delivers a lacklustre growth data just like clockwork we start hearing that we can expect another correction in real estate prices as we are now fast tracking an inevitable recession – all a distinct possibility.

How quickly some forget that Australia has now successfully completed a record 24 years of consecutive economic growth. As is the case in Australia where real wages are down this is a global problem where I foresee that the household sector will struggle with the declining weak wage results. This is further evident with the data release this week identifying GDP growth for 2014/15 came in at 2.4% and nominal GDP growth at 1.8% for the 2014/15 financial year, which is the weakest growth in nominal GDP since 1961/62.

As a result of the wages decline what is even more alarming is when one examines stock levels we are witnessing the lowest ever levels despite a record low cash rate. For example, Mosman has 5,890 houses with just 63 on the market today which represents 1.069% of properties on the market and which is also quite common for the vast majority of Sydney suburbs.

Too many are sugar – coating the Sydney property market by focusing on the Sydney median house price, which keeps increasing, and not looking at the grass – roots property market by analysing individual niche market performances which paints an entirely different proposition. When you have individual property markets posting record low stock levels it’s hardly likely we will see significant price growth which is exactly what we are seeing today.

The reality being in Mosman is that presently we have 1.069% of vendors on the market with the remaining 98.931% of property owners not wanting to sell despite a record low cash rate that will almost certainly go lower in 2016. Much of the problem relates solely to job security where individual households are refusing to take on more debt which then has the markets flatlining.

Going on past market corrections which were brought about by unprecedented high turnover of properties by households which has not been the case in the majority of instances. We have seen unusual high turnover of properties by investors to the extent that we are now seeing parity being reached between tenants and investors in terms of rent. That’s good news for those renting given it appears that rental growth has peaked in Sydney where in some cases we are now seeing an oversupply of properties for rent.

This is a positive for the economy given the general rule of thumb is one – third rent, the next third own with a mortgage and the final third own with no mortgage. So it appears now that the Sydney investor market has peaked and we can now expect to see some tapering of prices as investors chase new market opportunities. Brisbane is the stand – out so we expect to see investors jumping all over that market from here on. In the perfect property world this is exactly how investor machinations should operate with Sydney and Melbourne peaking and entering re – calibration mode.

Another interesting thing to look out for is the Sydney vacancy rate which we expect to see grow significantly given the enormous investor movements across Sydney. We can also expect to see some investors flipping investment properties by taking their profits and then re – investing in the new growth markets where depending on when they bought into the market there have been very strong capital appreciation generated.

When the Australian economy produces a poor report card this then forces our elected politicians to concentrate on the much needed reforms that must be implemented as we are now twelve months out from the next Federal Election.

MOSMAN – 2088

• Number of houses on the market this time last year – 80

• Number of houses on the market last week – 65

• Number of houses on the market this week – 66

• Number of apartments on the market this time last year – 61

• Number of apartments on the market last week – 42

• Number of apartments on the market this week – 49

CREMORNE – 2090

• Number of houses on the market this time last year – 5

• Number of houses on the market last week – 4

• Number of houses on the market this week – 4

• Number of apartments on the market this time last year – 15

• Number of apartments on the market last week – 18

• Number of apartments on the market this week – 19

NEUTRAL BAY – 2089

• Number of houses on the market this time last year – 10

• Number of houses on the market last week – 2

•Number of houses on the market this week – 5

• Number of apartments on the market this time last year– 29

• Number of apartments on the market last week – 30

• Number of apartments on the market this week – 35

For this week’s sales in Cremorne real estate, Cremorne Point real estate, Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Neutral Bay real estate, Cammeray real estate.

ROBERT SIMEON is a director of Richardson Wrench Mosman and Neutral Bay and has been selling residential real estate in Sydney since 1985. 
He has also been writing real estate blog Virtual Realty News since 2000.